Ecuador's risk premium hits lowest level since 2014

Ecuador's "country risk" premium has reached its lowest point since 2014, hitting 378 points on June 16. The government hailed the figure as "one of the lowest in history," signaling a potential boost in international market confidence and economic outlook.

The "country risk" index, which reflects the extra yield the state must pay to finance itself internationally compared to U.S. 10-year sovereign bonds, had not seen such low levels since September 2014. The Central Bank of Ecuador noted on social media that this "evidences greater confidence from international markets and better prospects for investment and economic development."

Since President Daniel Noboa took office in November 2023, when the indicator stood at 1,759 points and peaked at 2,133 in December, it has steadily declined. The premium fell below 400 points earlier in June before reaching the current 378.

Noboa's administration has attributed this improvement to a series of fiscal reforms aimed at reducing the deficit, implemented under a $5 billion loan program with the International Monetary Fund (IMF) spanning 2024-2028. Key measures include a three-percentage-point increase in the value-added tax, from 12% to 15%, earmarked for combating insecurity, and the elimination of diesel subsidies. The government also reduced the number of ministries from 20 to 14 last year, involving the dismissal of approximately 5,000 public officials, and recently announced a further reduction to 10 ministries as part of an efficiency plan to optimize public spending.